The Mandatory Roth Catch-Up: What Most Employees Over 50 Earning $150k+ Needs to Know
Under SECURE 2.0, high earners in 401(k) and some 403(b) and 457 plans can no longer make age-50 catch-up contributions on a pre-tax basis.
The New Rule in Plain English
Starting in 2026, the IRS mandates that employees aged 50 or older who earned more than $150,000 in the prior year must make their age-50 catch-up contributions as Roth (after-tax) contributions. This applies to 401(k), 403(b), and governmental 457(b) plans. You no longer have the option to make these specific contributions on a pre-tax basis.
Who This Affects
Most employees aged 50 or older whose prior-year in FICA wages exceeded $150,000 — in a private company 401(k), a nonprofit, school system, or hospital 403(b), or a governmental 457(b) plan. The $150,000 threshold is indexed to inflation.
Not Covered by Social Security? This Rule Doesn't Apply
Massachusetts public employees don't pay into Social Security. Seven other states — California, Texas, Ohio, Illinois, Colorado, Louisiana, and Georgia — join Massachusetts in accounting for nearly 73% of all non-covered state and local employees nationwide.¹ But non-coverage isn't limited to these eight states — every state has some public employees outside Social Security. Because the $150,000 threshold is defined in FICA wages, and non-covered employees have no FICA wages, the mandatory Roth catch-up rule doesn't apply to their 403(b) or 457(b) contributions.
¹ Source: National Conference of State Legislatures, citing Congressional Research Service data (2018).
2026 Contribution Limits
| Plan Type | Standard Limit | Age 50+ Catch-Up | Ages 60–63 Super Catch-Up | Total (Age 50+) |
|---|---|---|---|---|
| 401(k) | $24,500 | $8,000 — Roth required if $150k+ | $11,250 | $32,500 |
| 403(b) | $24,500 | $8,000 — Roth required if $150k+ | $11,250 | $32,500 |
| 457(b) — Governmental | $24,500 | $8,000 — Roth required if $150k+ | $11,250 | $32,500 |
| 403(b) + 457(b) combined | $49,000 | $16,000 | $22,500 | $65,000+ |
Plan Must Offer Roth
If your employer's plan does not currently offer a Roth option, no participant — regardless of income — can make catch-up contributions until the Roth feature is added. Check with your plan administrator before year-end.
Which Plans and Employees Are Covered
Private Sector
Corporate employees, small business owners, self-employed. Most common retirement plan in the private sector.
Nonprofit & Healthcare
Hospital staff, university employees, nonprofit workers, private school teachers. Rule applies in full.
Government & Public
State and local government employees. Governmental 457(b) plans are covered. 457(b) plans of tax-exempt organizations are not.
Why the Roth Catch-Up Warrants a Different Investment Strategy
Most employees default to the same investment mix across all their retirement accounts. Because the Roth catch-up operates under fundamentally different tax rules, it deserves its own allocation logic.
No RMDs — A Longer Time Horizon
Unlike traditional pre-tax accounts, Roth accounts have no Required Minimum Distributions (RMDs) during your lifetime. The IRS forces you to start withdrawing from a traditional 401(k) or 403(b) in your 70s. Your Roth catch-up account can grow untouched for as long as you live.
The implication: Because this bucket has a longer effective life, it can support a more aggressive growth allocation — higher equity exposure — than your traditional pre-tax accounts.
Tax-Free Growth Is Most Valuable on High-Growth Assets
Every dollar of growth in a Roth account is eventually 100% tax-free. In a traditional account, if an investment triples in value, you owe taxes on the entire gain at withdrawal. In a Roth account, the gain is entirely yours.
The implication: Put your highest-growth-potential assets — equities, growth funds — into the Roth wrapper. Hold your more conservative fixed-income allocations in the traditional pre-tax accounts where the tax drag on lower returns is less costly.
Asset Location: One Portfolio, Two Tax Buckets
Your overall allocation might be 60% stocks and 40% bonds. You don't have to mirror that split in every account.
| Account | Hold Here | Why |
|---|---|---|
| Traditional 401(k) / 403(b) / 457 | Bonds, stable value, conservative funds | Lower growth = lower tax drag at withdrawal |
| Roth Catch-Up Account | Equities, growth funds | All gains are tax-free — maximize growth here |
The RMD Tax Bracket Problem — and the Roth Hedge
As you accumulate more in traditional pre-tax accounts, mandatory RMDs in your 70s can push you into a higher federal tax bracket — stacking on top of Social Security income, pension income, and any other sources.
Roth distributions do not count toward the IRS "Combined Income" formula that determines how much of your Social Security is taxed federally. Building a meaningful Roth balance now reduces your future RMD exposure and gives you tax-bracket flexibility in retirement.
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Find Out If Your Catch-Up Should Be Roth or Pre-Tax
The answer depends on your income, plan type, current tax bracket, and retirement timeline. $200/hour — Tim will run the numbers for your situation.
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